New Mastercard and Visa pre-authorisation enhancements

Mastercard and Visa have recently updated their pre-authorisation processing standards. The new standards apply to authorisations that hold an initial or pre-authorised amount on a card for a period of time until the final amount is known.

Why are Mastercard and Visa making changes?

Pre-authorisations that hold funds on customers’ cards after the authorisation should have been completed or cancelled are frequently the cause of customer complaints. The new standards help alleviate both cardholder and merchant frustrations.

The new Mastercard pre-authorisation standards require that you:

Inform all cardholders of the amount that will be held on their card prior to processing a pre-authorisation

Are aware that the validity period of a pre-authorisation is now 30 days with the cardholder’s funds being placed on hold for this time unless the pre-authorisation is completed or cancelled

Cancel or complete all pre-authorisations. You can no longer leave them to ‘expire’

Use the new extend feature on your payment solution to extend the hold if it is required for longer than 30 days

Are aware that the extra payment guarantee of 15-20% has been removed. To complete transactions for an amount higher than the original pre-authorised amount you will need to use the new ‘top-up’ feature on your payment solution

Are aware of the new ‘Account Verify’ feature that allows you to check the validity* of the card number without holding any funds on the card.

What the Mastercard standards mean for your customers, an example:

Ms Jones books a rental car online for her upcoming holiday. The rental car operator pre-authorises $1500 on her Mastercard. One week before her holiday Ms Jones changes her travel plans and cancels the rental car. She’s still within the terms of the cancelation policy.

Current standards:

Despite the rental car operator no longer requiring the money to be held, the pre-authorisation remains on Ms Jones credit card until it expires (the amount of time until this happens can vary based on the institution issuing the Mastercard). This is frustrating for Ms Jones as her available credit is now severely limited.

Example:

Ms Jones Credit Limit: $2000

Pre-Authorisation: - $1500

Remaining Credit Limit: $500

New standards:

The rental car operator uses the new cancel feature to cancel the pre-authorisation while Ms Jones is on the phone with them. Ms Jones will have the funds available on her card within 24-hours.

Example:

Ms Jones Credit Limit: $2000

Pre-Authorisation: - $1500

Cancel Pre-Authorisation: + $1500

Remaining Credit Limit: $2000

The new Visa pre-authorisation standards require that you:

Specify a reason for all transactions initiated by you

Inform cardholders when the pre-authorisation is an estimate and tell them the estimated amount

Inform cardholders when the pre-authorisation is for an initial amount and let them know that subsequent authorisations may be made

Understand that pre-authorisation will only be made available to you if you are a certain type of merchant (for example, cruise, lodging, vehicle rentals, restaurants and bars)

Are aware that the validity period of an authorisation will vary based on what type of merchant you are (for example, restaurants and bars – 24-hours, hotels and vehicle rentals – 31 days)

Understand that cruise, lodging and vehicle rentals have a 15% extra payment guarantee, restaurants and bars have a 20% extra payment guarantee, and these are the only merchant types with an extra payment guarantee

Are aware that authorisations processed via a standing instruction (such as a purchase paid in instalments or a recurring payment for a membership) will require additional information to be passed to Visa.

Next steps

If you currently process pre-authorisations, your payment solution(s) will need to be updated to allow you to observe these new standards. Refer to the information below for details on updating your payment solution(s). Note that Mastercard and Visa updates may occur separately. In most cases, the Mastercard update will happen first. More information will be provided to you regarding the Visa standards based on your merchant type once the update for your payment solution is available.

EFTPOS 1

Mastercard

Your EFTPOS 1 terminal will be updated with new pre-authorisation features to enable you to meet the Mastercard standards. You will receive a letter advising you of when your terminal update will occur.

Once you have access to the new features, you are required to cancel or complete any new Mastercard pre-authorisations within 30 days. You can also use the new top-up or extend features. Don’t allow a Mastercard pre-authorisation to ‘expire’, this keeps the amount held on the customer’s card for this period unnecessarily and may result in customer complaints.

EFTPOS 1 features and description

Expiring Pre-Auth Report

You will now be able to retrieve a daily report of expiring open pre-authorisations to manage any funds that are due to be released to the cardholder.

You are no longer allowed to leave pre-authorisations to ‘expire’. Cancel or complete all Mastercard pre-authorisations.

Top-Up

An open pre-authorisation can be 'topped up', allowing you to increase the amount held against a cardholder’s account. The expiry date for the pre-authorisation will also be extended when the top-up is approved, providing additional flexibility in managing your pre-authorisations.

Extend

The expiry date of an open pre-authorisation can be extended to 31 days from the current date, without the need to increase the amount authorised.

Partial Cancel

An authorised amount of an open pre-authorisation can be partially reduced. This can be used when you no longer require the full amount to be held. The cancelled amount will be released on the cardholder’s account within 24 hours.

Cancel

In the circumstance where you are not intending to complete the authorisation and you therefore no longer require the amount to be held, you must use the cancel feature to return the full amount to the customer’s card. The full amount will be released on the cardholder’s account within 24 hours.

You are no longer allowed to leave pre-authorisations to ‘expire’. Cancel or complete all Mastercard pre-authorisations.

Account verify with $0*

This can be used when a card number needs to be validated prior to setting a recurring payment. It works as a $0.00 pre-authorisation, with no requirement to perform a completion. The receipt will show an amount of $0.00.

Previously, staff may have processed a $1.00 charge to the customer’s card that would have been later reversed. This removes manual steps for your staff and improves the cardholder experience.

Other things to know

If you have active Mastercard pre-authorisation transactions in your terminal when you receive your software update, continue to treat those transactions as you do today

The new EFTPOS 1 features only apply to Mastercard transactions. Software updates to address changes in Visa pre-authorisation standards are coming soon. We will keep you informed of these as more information becomes available.

Visa

Your terminal is scheduled to be updated in early 2018. We will be in contact with you closer to the time with more details.

EFTPOS 1i

Updated terminal software will be available in early 2018. Your POS vendor will also be required to make changes to your POS software to enable the new Mastercard and Visa features. We strongly encourage you to get in contact with your POS vendor to find out when the new Mastercard and Visa features will be available to you.

Quest

Please contact your Relationship Manager or our Business Banking Specialists on 1300 650 977 to discuss your options for upgrading your terminal to use the new pre-authorisation features.

Ingenico

Please contact your Relationship Manager or our Business Banking Specialists on 1300 650 977 to discuss your options for upgrading your terminal to use the new pre-authorisation features.

Other terminal

Please contact your terminal provider to find out when your terminal software will be updated. You’ll be required to uphold the new standards from the time that your terminal software is updated.

PayWay API or Quick Stream

Mastercard

PayWay API and Quick Stream are already compatible with the new standards. You will need to make updates to your website in order to use the new features. Please visit quickstream.westpac.com.au/docs/quickgateway/#pre-authorisations for detailed information on how to update your website. You must make these updates as quickly as possible to comply with the standards.

Once you have access to the new features, you are required to cancel or complete any new Mastercard pre-authorisations within 30 days. You can also use the new top-up or extend features. Do not allow a Mastercard pre-authorisation to ‘expire’, as this will hold the amount on the customer’s card for this period and may cause the customer to complain.

Visa

PayWay API and Quick Stream will be compatible with the new standards later this year. We’ll provide you with information on how to update your website once it’s available.

Third party payment gateway

We’re currently working with our third party payment gateways to make them compatible with the new Mastercard and Visa standards and we’ll provide you with more information once it’s available. We also strongly encourage you to get in contact with your payment gateway to find out when the new Mastercard and Visa features will be available to you.

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